Haunhorst, Brian The Free File Sharing Era's Evolution in Ethics

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The Free File Sharing Era’s Evolution in Ethics & Marketing:

The Free File Sharing Era’s Evolution in Ethics & Marketing Brian Haunhorst Tennessee State University MGMT 5000 – Fall 2012

The Beginning:

The Beginning Napster – September of 1999 Founded by Shawn Fanning & Sean Parker Introduced File Sharing Software using Peer-to-Peer Technology On the heels of a sour perception of the recording industry’s over-inflating cost of CD’s from 1995-2000 Product: Your Favorite Music Price: Free

Peer-to-Peer Technology (P2P):

Peer-to-Peer Technology (P2P) User sends a request to the server for a song The server checks it’s database of music and looks for the song on other PC’s Found it! The song is sent directly from the PC storing the song to the user who requested it. 1 2 3 4

The Free File Sharing Band-Wagon:

The Free File Sharing Band-Wagon Free File Sharing

The Dilemma:

Invented in 2003 by Three Programmers: Ahti Heinla , Priit Kasesalu , & Jaan Tallinn Interestingly, these three programmers also developed Kazaa . The Dilemma ETHICS Two Companies One IT Group Same Technology Two Distinctly Different Ethical Identities Shall Innovation be stifled by Copyright?


Copyright Infringement: the “unauthorized use of works under copyright, infringing the copyright holder’s exclusive rights, such as the right to reproduce, distribute, display, or perform the copyright work, spread the information contained with copyrighted works, or to make derivative works. Copyright Two Categories: Direct & Indirect Direct Infringement: Act of copying work under copyright without proper authorization or consent. Indirect Infringement (Secondary Liability): Vicarious Liability Contributory Liability

Series of Court Battles:

A&M Records, Inc. vs. Napster Inc. - 2000 Series of Court Battles MGM Studios vs. Grokster - 2003 One-Time Sale Ruling Sparked Outrage Amongst RIAA, & Lawsuits againsts individuals Insued MGM Studios vs. Grokster - 2005

The Beginning of the End:

The Beginning of the End MGM vs. Grokster sparked the domino effect and one by one, companies such as Kazaa and Limewire were sued on terms of Secondary Liability, and have since been court ordered to cease operations. Shown are current snapshots from the websites of Limewire & Kazaa . Today: Merely promoting or marketing a product that encourages infringement, is considered ILLEGAL !


Alternatives? In the context of “Free Copyrighted File Sharing”, No “Legal” Alternatives exist. However, business models that legally distribute music, are now the norm in today’s environment, such as iTunes & Rhapsody.


iTunes was introduced in 2001 Legal business model of charging for music Small market share due to competition from the free file sharing industry iTunes In 2001, The Apple brand was 49 th globally, and was valued at $5,464million In 2012, The Apple brand is 2 nd globally, and is valued at $76,568million Apples ’ Think Different mentality, ethical business strategies, and leading innovation in technology are behind the brands success.


Subscription Service Business Model Monthly Fee Unlimited Access to millions of songs Multiple platforms such as home based computers, mobile devices, etc. Recently partnered with Yahoo! Marketing strategy to connect with new consumers Both companies benefit from the partnership as Yahoo!’s goal is to become the leading starting point on the web. Rhapsody

Web of Marketing:

Web of Marketing The free “copyrighted” file sharing era is long gone! Old versions of the software still exist and function, however, the user downloading copyrighted files, is indeed, Breaking the Law! In today’s environment, companies are finding new ways to promote and market their product through partnerships on the web. Essentially, companies today in media distribution have figured how to weave a “web” of marketing to offer consumers a legal product at a competitive value!